BoJ's Uchida: Japan's economy is on a moderate recovery path
Bank of Japan Deputy Governor Shinichi Uchida said on Friday that Japan's economy is experiencing a moderate recovery, though some weaknesses persist.
Key quotes
Japan's economy is experiencing a moderate recovery, though some weaknesses persist.
The underlying inflation rate is gradually rising toward the 2% target.
The Bank of Japan's (BoJ) Japanese government bonds (JGB) holdings continue to provide a strong monetary easing effect.
Won't comment on day-to-day JGB yield levels, moves.
No change to our stance on short-term policy rate, JGB taper despite recent yield moves.
JGB yields fluctuate depending on market views on the economy, prices as well as overseas developments.
Cannot say in advance how the BoJ’s policy would affect direction of moves in JGB yields.
The BoJ guides monetary policy aiming to achieve price stability, not to monetize government debt.
Market reaction
At the time of writing, the USD/JPY pair is trading 0.07% higher on the day to trade at 149.78.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
